Why companies like Facebook and Netflix will rule the future of TV, according to BuzzFeed's CEO

BuzzFeed CEO Jonah Peretti has a vision of the future of TV-style
shows, and if it’s true, the cable TV industry should be getting
nervous.

Last month,
I wrote about how Netflix CEO Reed Hastings and Facebook CEO
Mark Zuckerberg seem to share a fundamental thesis about premium
video: namely that in the digital realm, it can be sustained by a
single revenue stream — either advertising or subscription.

This sits in contrast to the business model of cable TV, which
relies on the dual revenue stream of both monthly
subscription revenue and advertising.

It’s been a big debate in the industry whether the
dual-revenue model will carry over to digital. The most
likely form seems to be the new "cable-lite" bundles like Sling
TV, Hulu with Live TV, YouTube TV, and so on. These digital
ad-supported bundles are pretty similar to traditional cable
ones, but have less channels, more on-demand capabilities, and
added flexibility to cancel. And they are delivered over the
internet to your smart TV, phone, or laptop.

But some in the industry think the new digital video frontier
will be dominated by new business models. In an
interview with Variety, Peretti seems to put himself firmly
in the second camp.

“I think we’re going to see the market bifurcate into two
buckets,” Peretti said of longform, TV-like video.

“One will be best represented by Netflix and HBO, and that will
be subscription-based revenue models, with no advertising and
premium, expensive, high-cost-per-minute content. Think ‘Game of
Thrones' or 'House of Cards' type stuff.

“There will be another bucket dominated by Facebook and YouTube,
and a few others — we’ll see who ends up on the traditional media
side being able to step into that space — that will be
ad-supported media and kind of replace what broadcast TV used to
be. So, massive reach. No affiliate fees. Advertising supported.
And it will be lower cost per minute, but it will become more
premium.”

That is a very specific vision of the future of the industry that
Peretti laid out. And it has no mention of cable networks that
get both subscription and ad revenue. In fact, Peretti
specifically said that the ad-supported, broad-reach video
companies he envisions dominating one future “bucket” will not
get affiliate fees.

That is tough medicine for some TV networks. Of course, you
should take anything Peretti says with a giant grain of salt,
since he clearly has a huge stake in which business model rules.
But still, if that world does truly come into being — the world
of Hastings, Zuckerberg, and Peretti — you can bet there will be
a massive culling of mediocre cable networks.